The fall of the (ASX BANKS) Gods

Posted: May 3, 2016 in Uncategorized

Who follows my blog knows that is just a year that I am focused on staying away from Australian Banks.

Everybody in Australia is in love with the banks for the dividend, but as you see from the graph below (Using QFN a Betashares ETF that represents the Australian Financial sector) it was a losing bet. Yes you get dividends, but you pay the price – quite high..an aggregate over -18%).

Why I was so negative? All starts with new banking rules in davos that essentially cut the easy profits. Then comes the overextended mortgage sector and finally the not so perfect Australian dream and the extraordinary valuations.

Compounding that is the fact that 80% of the self managed super funds managed by the retiree or by the average financial planner is over invested in the financial sectors (I do not have the data, but friends in the told me their data says it is about 60%) creates a big problem for the self founded retiree.

ANZ this morning showed what I meant. Cash Profit -24% and a dividend cut of -7%.

Don’t get me wrong. I am not shorting the bank or saying that they will have major issues. I am just saying that indexing (as ASX relies heavily on financial) stopped working a while ago and you need to get smart to get dividend and growth.Capture QFN

And this is just the start.

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